The New American Standard of Living

In 2005, few people on the planet could afford Americans’ standard of living. Not even Americans.

But now the wheel has turned. The US is facing financial reality. And yesterday, we gave you our most audacious forecast ever: the popolo minuto are headed for the barricades. Yes, dear reader, prepare for revolution, repression, and ruin. Buy stocks in companies that make police batons and pepper gas…prisons and window glass…drones and bandages.

The Christian Science Monitor:

A Long, Steep Drop for Americans’ Standard of Living

Think life is not as good as it used to be, at least in terms of your wallet? You’d be right about that. The standard of living for Americans has fallen longer and more steeply over the past three years than at any time since the US government began recording it five decades ago.

Bottom line: The average individual now has $1,315 less in disposable income than he or she did three years ago at the onset of the Great Recession — even though the recession ended, technically speaking, in mid-2009. That means less money to spend at the spa or the movies, less for vacations, new carpeting for the house, or dinner at a restaurant.

In short, it means a less vibrant economy, with more Americans spending primarily on necessities. The diminished standard of living, moreover, is squeezing the middle class, whose restlessness and discontent are evident in grass-roots movements such as the tea party and “Occupy Wall Street” and who may take out their frustrations on incumbent politicians in next year’s election.

Per capita disposal personal income — a key indicator of the standard of living — peaked in the spring of 2008, at $33,794 (measured as after-tax income). As of the second quarter of 2011, it was $32,479 — almost a 4 percent drop. If per capita disposable income had continued to grow at its normal pace, it would have been more than $34,000 a year by now.

The misery index — which combines inflation and unemployment — is almost back to where it was 30 years ago — after inflation had reached 13% and stocks had been going down for 16 years.

But wait. Things didn’t turn out so bad after that, did they? In the early ’80s came “Morning in America” and a 20-year boom.

Don’t count on it this time, dear reader. 1981 was everything 2011 is not. Back then, interest rates and inflation were sky high. Stocks were low. And Paul Volcker had just taken over at the Fed. When he said he was going to turn things around, he meant it.

Today, interest rates are at a half-century low…stocks are still expensive…and Ben Bernanke is as confused as Volcker was clear- headed. Turn things around now and you get rising interest rates, falling stock prices…and more misery. Look out the window. You can see the sun on the horizon twice a day. But only once is it rising.

The world has turned. Against us. Mitt Romney may have God in his pocket. But from our perch here at Markets and Money headquarters in Paris, it looks more likely that the gods have gone over to the other side.

Here’s more…from Atlantic Monthly. There are six million more ‘workers’ in the US than there were 10 years ago. Well, they would be workers…if they could get jobs. Trouble is, there are fewer jobs today than there were then. In other works, over the decade, the US economy backed up. Here’s more:

50% of All Workers Made Less than $26,000 in 2010

Today we get our first look at American wages in 2010 based on payroll taxes reported to the Social Security Administration. David Cay Johnston picks out the most important takeaways, including:

1) Half of all workers made less than $26,364, the median wage in 2010. That means the typical wage is at its lowest level since 1999, after adjusting for inflation.

Continuing Deterioration of US Jobs and Pay in 2010

2) The number of millionaires increased by about 20 percent.

3) The size of the missing workforce is 10 million. The number of working people fell by 5.2 million since 2007. But that’s not the entire job deficit, because, based on population growth estimates, 4.5 million more would have joined the workforce between 2007 and 2011. Add it up, and you get a 10-million-worker gap.

What you see in the graph above is that median pay took a nosedive after 2007, effectively wiping out all gains made in the previous eight years.

Americans are getting poor faster than they got rich.

And more thoughts…

“Can you help me,” said the tall, attractive, dark-haired young woman.

We had just gotten out of the subway at the Auteuil stop. It is a strange station, where the metro trains only go in one direction.

“I want to go the other way and I don’t know how to do it.”

“Of course, Mademoiselle,” we began gallantly. Then, we explained how the system worked in this part of the underground railway.

But she looked off into the distance. She seemed to be puzzled, with a faraway look in her eyes. We explained the geography and the mechanics of it. We oriented her, pointing her to what we believed was True North. We would have been happy to explain the motion of the earth around the sun and the shifting of the seasons, too, for she was pretty and smiled. But she seemed to be looking for more practical advice.

“Come over here…here’s a map… Look… See how the subway line goes this way here…and that way there. Don’t you see how it works?”


“Well…just look at this…see the pattern…?”

“I’m afraid not…” she said quietly, lowering her head a bit and raising her right arm. In her right hand, we hadn’t noticed, was a white cane.

“Oh…I see… But I guess you don’t see…do you?”


*** One of the hardest things to understand is how come modern democracy could be so shiftless…and modern capitalism so unproductive. As to the first question, how come the feds bail out the banks, when the voters are clearly against it? And how come they continue to spend trillions on foreign wars…when the voters clearly cannot afford it? As to the second, how is it possible for the most sophisticated, high tech, hugely funded capitalist system the world has ever seen to allocate capital so badly? Over the space of its most recent, and most flamboyant decade, it actually made people poorer!

It scarcely seems possible.

But here we are. American democracy and America capitalism have been hijacked by zombies. Trillions of dollars are directed to sectors with negative real rates of return — education, heath, bureaucracy and war. Washington is the nation’s richest city. And government — along with its zombie clients — are America’s only thriving industries.

More to come…


Bill Bonner,
for Markets and Money

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail Markets and Money.

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7 Comments on "The New American Standard of Living"

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But according to this report in the Torygraph, all is bright for America.

Does seem to make sense too. Oddly enough.


The answer is in your 2nd to last paragraph Bill, greed and corruption, and we the taxpayers can’t do anything about. It is now up to the young, with all their energy and anger to forge a new world, because that is what is needed. I wish them well.


Dear Bill Bonner, you wrote in the article “Trillions of dollars are directed to sectors with negative real rates of return — education …etc.” As an educator I think of education as a contributor (naturally!) Here in Aust we have this idea of creating “a clever country.” I see Agora, your newsletters and articles as education. And, yes, I believe they produce positive not negative real rates of return for your clients and yourselves (the Agora stable.) So, yes, I’d like to hear more about your views on education.


agree with everything, however i do not accept your claim that education is a sector with negative real rates of return. surely you’re speaking in a strictly narrow sense, ignoring the wider social/technological benefits derived from a highly educated population?

Ivo, If you look back to past essays or if you wait long enough he is sure to explain himself further. However in the past essays he has taken up the case that more money in the current education system is not producing and extra $ worth of output for a $ worth of input. And this applies to anything, and is termed the Law of Diminishing Marginal Utility. A bit like what is happening with China and its growth, people are catching on that all that hot money is creating massive inflation now and that a unit of credit… Read more »

With little joy in the financial news lately, I was refreshed to read Bill’s latest article where he gave directions to the blind lady in France. Upon reading this piece to my wife and commenting on Bill’s talents, she replied, “yeah, is he (Bill) the one that is gunna chuck money from a plane”? After I stopped laughing, I explained that Ben was more like Bill’s nemesis. Just goes to show like story about the blind lady looking for directions, I shouldn’t assume that my wife listens to all the stuff I talk about!

Ned S

Bill starts with “In 2005, few people on the planet could afford Americans’ standard of living. Not even Americans.”

And ends with “But here we are. American democracy and America capitalism have been hijacked by zombies. Trillions of dollars are directed to sectors with negative real rates of return — education, heath, bureaucracy and war. Washington is the nation’s richest city. And government — along with its zombie clients — are America’s only thriving industries.”

Can’t for the life of me see what’s difficult to understand about that? :)

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